This invention generally relates to systems and methods used by financial institutions to identify existing customers as potential targets for the marketing of additional financial products and services. More particularly, this invention pertains to systems and methods for matching bank customers to financial products, services, and retail sales incentives by analyzing the cash transaction activity of customer holding a direct-deposit-account.
Banks continuously try to offer and cross-sell their customers additional products and services. One established marketing technique is to induce customers with savings accounts to open a certificate of deposit, or to induce customers retaining a certificate of deposit to participate in an investment fund at a higher interest rate yield. As an incentive to consider the cross-sell offer, banks offer “free” items such as kitchen appliances. One flaw associated with this “free product” incentive technique is that no consideration is given to the customer's individual preference or financial ability to be a candidate for the products being offered for a bank-defined acquisition program.
Over the last decade, banks have strengthened their retail cross-sell marketing initiatives by implementing demographic and lifestyle segmentation systems to better target and match acquisition products. These segmentation systems break down a bank customer database into lifestyle categories such as elite suburbs, urban core, country families, and rustic living. This lifestyle category may take into account a variety of factors including the age of the customer, individual and household income, marital status, family size, homeowner or renter status, ZIP code, occupation, and educational level to determine the best customer group to offer products.
When the lifestyle segment is selected, various statistical models are applied to lifestyle information stored in these segments. These models generate a statistical score and probability of a customer residing in the segment. The score and probability determinations help the bank identify the customer clusters that contain the more and less likely candidates that best match a bank defined acquisition, performance and risk initiatives. The statistical models used for this statistical probability process include, but are not limited to, time series, linear regression, and logistic regression models, or the use of decision tree and regression segmentation modeling techniques, such as Chi-Square Automatic Interactive Detector (CHAID) or Classification and Regression Tree (CART) models. The implementation of this class of statistical technology has contributed to an increase in the response rate from less than one-half percent a decade ago, to over two percent for a bank's target marketing programs. These lifestyle segmentation and statistical models are sometimes expanded to assist a bank in identifying customers that match specific bank defined performance and fraud detection criteria.
One example of bank-defined performance criteria is comparing a customer's beginning and ending account balance activity to a customer's income and demographic segment to evaluate a customer's financial potential to the bank. The customer account-balance-to-income metrics assist bank management in directing marketing campaigns to attract high valued customers to increase bank usage.
Another example of bank-defined risk criteria is matching a customer's income and demographic segment classification to a customer's monthly deposit activity. This allows the bank to detect and forecast a pattern change in deposits activity that could affect a future loan or mortgage payment.
One weakness in prior art lifestyle segmentation and statistical scoring modeling techniques is that no consideration has been given to measuring the individual and household consumption patterns found within each bank customer direct deposit, time deposit, and loan accounts to score and forecast the financial rate of substitution that a customer will support, the spending preferences of the customer, and the aversion to risk for each customers household.
Another prior art method that has taught the use of relationship scoring to identify customers that best match a bank defined incentive reward program is described in U.S. Pat. No. 6,009,415, issued to Shurling, et al., where each social security number (SSN) stored in a bank's customer-information-file (CIF) is assigned relationship points based on the number of bank accounts that are tied to a SSN holder. The length of time that each bank account is in existence is made part of the generation of the relationship points. An example of a relationship point matrix would then be the number of deposit account relationships, loan account relationships, and safe deposit account relationships owned by a SSN holder with the bank. Through a computer implementation of the relationship scoring system, the relationship points are summed for each SSN holder and matched to a specific incentive reward. Based on the points accumulated, an incentive reward could be reducing the interest rate on a loan, increasing interest paid on a deposit account, or eliminating the service charges on specific accounts.
The deficiency found in the methods of Shurling, et al., is that no consideration is given to the account usage, the account balances, and the account transaction history to justify the customer incentives. Assessing and scoring the number of bank accounts and years of longevity overlooks addressing the financial worthiness of the SSN holder to be a viable candidate to justify an incentive.
In the credit verification industry, an economic scoring technique has been a development that determines the likelihood that a credit user will pay his or her bills. The FICO scoring algorithm uses a scoring model and mathematical tables to assign points for different pieces of information which best predict future credit card payment behavior. The credit score analysis takes into consideration a borrower's credit history such as late payments, the amount of time credit has been established, the amount of credit used versus the amount of credit available, the length of time at present residence, and the negative credit information such as bankruptcies, charge-offs, collections, etc. The success of the FICO scoring algorithm has taught that by measuring and scoring the variation in payment history, that customer future payment ability can be forecast to a high degree of accuracy.
Economists for years have used the Euler equations to estimate the inter-temporal elasticity of substitution of individuals or households. From this consumption theoretical analysis the expenditure rates for maintaining a household, the expenditure rates for supporting a lifestyle, the propensity to save, and the aversion to risk can be predicted for an individual or a household. The empirical research foundation for proving these theoretical assumptions has been to use the consumption information provided by the Consumer Expenditure Survey published by the U.S. Department of Labor Bureau of Statistics. Because this consumption information is based on national or regional group consumption averages, the prediction results only address the consumption patterns for a selected demographic population. To obtain the consumption results for a specific individual or household, the actual consumption patterns would have to be observed. The banking industry is in a position for providing the insight to the consumption pattern for the individuals or households residing in each bank's database.